MAKATI LEASING AND FINANCE CORP. V. WEAREVER TEXTILE MILLS, INC.

G.R. No. L-58469 May 16, 1983

FACTS:

To obtain financial accommodations from Makati Leasing, Wearever Textile

discounted and assigned several receivables under a Receivable Purchase Agreement with
Makati Leasing. To secure the collection of receivables, it executed a chattel mortgage over
several raw materials and a machinery – Artos Aero Dryer Stentering Range (Dryer).
Wearever defaulted thus the properties mortgaged were extra judicially foreclosed. The
sheriff, after the restraining order was lifted, was able to enter the premises of Wearever
and removed the drive motor of the Dryer. The CA reversed the order of the CFI, ordering
the return of the drive motor since it cannot be the subject of a replevin suit being an
immovable bolted to the ground.

ISSUE: WHETHER OR NOT THE DRYER IS AN IMMOVABLE PROPERTY.

HELD:

NO

The SC relied on its ruling in Tumalad v. Vicencio, that if a house of strong materials
can be the subject of a Chattel Mortgage as long as the parties to the contract agree and no
innocent 3rd party will be prejudiced then moreso that a machinery may treated as a
movable since it is movable by nature and becomes immobilized only by destination. And
treating it as a chattel by way of a Chattel Mortgage, Wearever is estopped from claiming
otherwise.


PRUDENTIAL BANK V. PANIS 153 SCRA 390

G.R. No. L-50008 August 31, 1987

FACTS:
Spouses Magcale secured a loan from Prudential Bank by executing a real estate
mortgage over a residential building. The mortgage included also the right to occupy the lot
and the information about the sales patent applied for by the spouses for the lot to which
the building stood. After securing the first loan, the spouses secured another
from the same bank. To secure payment, another real estate mortgage was executed
over the same properties. The Secretary of Agriculture then issued a Miscellaneous Sales
Patent over the land which was later on mortgaged to the bank. The spouses then failed to
pay for the loan and the REM was extrajudicially foreclosed and sold in public auction
despite opposition from the spouses. The respondent court held that the REM was null and
void.

ISSUE: WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID.

HELD:
A real estate mortgage can be constituted on the building erected on the land belonging to
another. The inclusion of building distinct and separate from the land in the Civil
Code can only mean that the building itself is an immovable property.

While it is true that a mortgage of land necessarily includes in the absence

of stipulation of the improvements thereon, buildings, still a building in itself may be
mortgaged by itself apart from the land on which it is built. Such a mortgage would still be
considered as a REM for the building would
still be considered as immovable property even if dealt with separately and apart from the
land.

The original mortgage on the building and right to occupancy of the land
was executed before the issuance of the sales patent and before the
government was divested of title to the land. Under the foregoing, it is
evident that the mortgage executed by private respondent on his own
building was a valid mortgage.

As to the second mortgage, it was done after the sales patent was issued and thus prohibits
pertinent provisions of the Public Land Act.
SERG’S PRODUCTS AND GOQUIOLAY V. PCI LEASING AND FINANCE 338 SCRA 499

G.R. No. 137705 August 22, 2000

FACTS:

PCI filed a case for collection of a sum of money as well as a writ of

replevin for the seizure of machineries, subject of a chattel mortgage executed by
petitioner in favor of
PCI. Machineries of petitioner were seized and petitioner filed a motion for special
protective order. It asserts that the machineries were real property and could not be
subject of a chattel mortgage.

ISSUE: WHETHER OR NOT THE MACHINERIES PURCHASED AND IMPORTED BY SERG’S

BECAME REAL PROPERTY BY VIRTUE OF IMMOBILIZATION.

HELD:

The machineries in question have become immobilized by destination because

they are essential and principal elements in the industry, and thus have become immovable
in nature. Nonetheless, they are still proper subjects for a chattel mortgage. Contracting
parties may validly stipulate that a real property be considered
as personal. After agreement, they are consequently estopped from claiming
otherwise.
EVANGELISTA V. ALTO SURETY

G.R. No. L-11139 April 23, 1958

FACTS:

When Evangelista sought to take possession of the house, Rivera refused to

surrender it, upon the ground that he had leased the property from the Alto Surety &
Insurance Co., Inc. and that the latter is now the true owner of said property. It appears that
on 10 May 1952, a definite deed of sale of the same house had been issued to Alto Surety,
as the highest bidder at an auction sale held, on 29 September 1950, in compliance with a
writ of execution issued in Civil Case 6268 of the same court (Alto Surety & Insurance vs.
Maximo Quiambao, Rosario Guevara and Ricardo Rivera)" in which judgment for the sum of
money, had been rendered in favor of Alto Surety. Hence, on 13 June 1953, Evangelista
instituted an action against Alto Surety and Ricardo Rivera, for the purpose of establishing
his title over said house, and securing possession thereof, apart from recovering damages.
After due trial, the CFI Manila rendered judgment for Evangelista, sentencing Rivera and
Alto Surety to deliver the house in question to Evangelista and to pay him, jointly and
severally, P40.00 a month from October 1952, until said delivery. The decision was however
reversed by the Court of Appeals, which absolved Alto Surety from the complaint on
account that although the writ of attachment in favor of Evangelista had been filed with the
Register of Deeds of Manila prior to the sale in favor of Alto Surety, Evangelista did not
acquire thereby a preferential lien, the attachment having been levied as if the house in
question were immovable property.

ISSUE: WHETHER OR NOT A HOUSE CONSTRUCTED BY THE LESSEE OF THE LAND ON WHICH
IT IS BUILT, SHOULD BE DEALT WITH, FOR PURPOSE OF ATTACHMENT, AS IMMOVABLE
PROPERTY?

HELD:
The court ruled that the house is not personal property, much less a debt, credit or
other personal property not capable of manual delivery, but immovable property. As held in
Laddera vs. Hodges (48 OG 5374), "a true building is immovable or real property, whether it
is erected by the owner of the land or by a usufructuary or lessee.” The opinion that the
house of Rivera should have been attached, as "personal property capable of manual
delivery, by taking and safely keeping in his custody", for it declared that "Evangelista could
not have validly purchased Ricardo Rivera's house from the sheriff as the latter was not in
possession thereof at the time he sold it at a public auction” is untenable. Parties to a deed
of chattel mortgage may agree to consider a house as personal property for purposes of
said contract. However, this view is good only insofar as the contracting parties are
concerned. It is based, partly, upon the principle of estoppel. Neither this principle, nor said
view, is applicable to strangers to said contract. The rules on execution do not allow, and
should not be interpreted as to allow, the special consideration that parties to a contract
may have desired to impart to real estate as personal property, when they are not
ordinarily so. Sales on execution affect the public and third persons. The regulation
governing sales on execution are for public officials to follow. The form of proceedings
prescribed for each kind of property is suited to its character, not to the character which the
parties have given to it or desire to give it. The regulations were never intended to suit the
consideration that parties, may have privately given to the property levied upon. The court
therefore affirms the decision of the CA with cost against Alto Surety.
PIANSAY V. DAVID 12 SCRA 227

G.R. No. L-19468 October 30, 1964

FACTS:
David secured a loan from Vda. De Uy Kim, and to secure the payment, he executed
a chattel mortgage over a house in favor of Kim. Due to failure to pay, the CM was
foreclosed and Kim was the highest bidder in the public
auction. Kim then sold the house to Mangubat. The latter then filed charges against
David for the collection of loan and praying that the deed of sale issued by Kim in favor of
Piansay be declared null and void. The trial court held David liable to Mangubat but
dismissed the complaint with
regard Kim and Piansay. Kim and Piansay then filed charges against David and
Mangubat. Due to the civil case, David demanded from Piansay the payment of rentals for
the use of the house, which the latter claims to be his property.

ISSUE: WHETHER OR NOT THE SALE OF THE HOUSE IN THE

PROCEEDINGS FOR THE EXTRAJUDICIAL FORECLOSURE OF SAID CHATTEL MORTGAGE IS
VALID.

HELD:

Regardless of the validity of a contract constituting a chattel mortgage on a house,

as between the parties to the said contract, the same cannot and
doesn’t bind third persons who aren’t parties to the aforementioned
contract or their privies. As a consequence, the sale of the house in
question in the proceedings for the sale of the house in question in the
proceedings for the extrajudicial foreclosure of said chattel mortgage, is null and void
insofar as Mangubat is concerned and didn’t confer upon Kim as buyer in said sale, any
dominical right in and to said house.
PASTOR TOLENTINO v BASILIO BALTAZAR

G.R. No. L-14597 March 27, 1961

FACTS:

The object of this litigation is a parcel of land located in the barrio of Sagana,
municipality of Laur, province of Nueva Ecija. Angel Baltazar filed therefore a homestead
application which was approved by the Director of Lands on August 14, 1940. Subsequently,
or on April 1, 1941, he mortgaged the present and future improvements on said land to
Pastor Tolentino, for the sum of P1,500, with the understanding that if the same were not
paid, with interest thereon at the rate of 12% a year, within six (6) years, Tolentino could
elect, either to foreclose the mortgage or to compel the debtor to execute a deed of
absolute sale of said improvements. After the death of Angel Baltazar in 1945, his widow
and children conveyed to his son Basilio Baltazar their rights and interest in and to said land.
Apparently relying upon this conveyance, on August 28, 1946, Basilio Baltazar filed with the
Bureau of Lands a petition praying that the homestead application in his father's name be
cancelled, and that, in lieu thereof, his own (Basilio's)application be admitted. This petition
was soon granted. Subsequently, Homestead Patent No. V-8832 was issued to Basilio
Baltazar, and upon the authority thereof, he secured, on October 23, 1951, Original
Certificate of Title No. P-790 in his name.

On October 20, 1952, Tolentino instituted the present action against the estate of
Angel Baltazar, deceased, his son Basilio Baltazar, and the Director of Lands, for the
cancellation of said Original Certificate of Title No. P790, upon the ground that Basilio
Baltazar had secured it by fraud. The Director of Lands filed a cross-claim, joining Tolentino
in praying for the aforementioned relief. Basilio Baltazar denied the allegation of fraud and
maintained that Tolentino had no cause of action except against the deceased, Angel
Baltazar, and that this is neither the proper action nor the proper court to settle Tolentino's
claim.

ISSUE: WHETHER OR NOT THE FUTURE IMPROVEMENTS ON THE LAND WERE SUBJECT TO A
VALID AND SUBSISTING MORTGAGE IN FAVOR OF PASTOR TOLENTINO .

HELD:

The decision appealed from is hereby reversed, and another one shall be entered
sentencing defendant Basilio Baltazar to execute, within one (1) month from the date on
which this decision shall have become final, the corresponding deed of mortgage of said
improvements in favor of plaintiff Pastor Tolentino and, should Basilio Baltazar fail to
execute said deed of mortgage within the aforementioned period, authorizing the Clerk of
Court of the Court of First Instance of Nueva Ecija to execute said deed on behalf of Basilio
Baltazar, with the same force and effect as if he had personally signed it. Upon demand by
the Register of Deeds of Nueva Ecija, Basilio Baltazar shall moreover, surrender to him the
owner's duplicate of Original Certificate of Title No. P-790, for annotation thereon of the
mortgage thus constituted. Costs against defendant Basilio Baltazar. It is so ordered.
 PROPERTY

(CASE DIGESTS)

Ramon D. Villanueva Jr.

JD- 2B